USDA Qualifying: What is the max front and back DTI on USDA loans?

USDA Qualifying Ratios: What is the max front and back DTI on USDA loans?

Flexibility is allowed, but should be 29% front, 41% back.

Standard qualifying ratios are Total House Payment (PITI) to Income of 29% (front) and Total Debt Ratio including House Payment of 41% (back). It is possible to exceed these ratios with compensating factors. As far as USDA Rural Development is concerned, there is no maximum amount. The ratios may be exceeded; however, common sense and investor overlays will come into play. Depending on the strength of the compensating factors, front ratios in the mid to high 30s and back (total debt) ratios in the mid to high 40s are not uncommon.

Note: Standard ratios can be exceeded by up to 2% on energy-efficient NEW and EXISTING homes meeting requirements of the 2006 International Energy Conservation Code.

Under the special program called “Rural Energy Plus,” the qualifying ratios used to determine an applicant’s ability to repay a home loan may be exceeded by up to two percentage points if an energy-efficient home is purchased. This applies to both new and existing homes.

All new homes that are built to meet the 2006 International Energy Conservation Code (IECC) or a subsequent comparable code are considered energy efficient and eligible for the two percentage point increase in the qualifying ratios. Existing homes that meet the same standard, or are being retrofitted to meet it, are also eligible.

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    USDA Home Loans and Why They Are So Convenient

    What is a USDA Mortgage Loan?

    Home loans are sponsored by the Rural Housing Service (RHS) of the United States Department of Agriculture (USDA). These USDA home loans are also known as Section 502 loans. Under this section low income applicants can apply for direct loans (from money that is appropriated by the Congress). Besides that people whose total household income happens to be less than 115% of the median household income (in a qualified rural area) can also qualify for mortgages from legitimate lenders.

    Purpose of a USDA Loan

    USDA home loans are primarily used to aid low income families or individuals that buy homes in rural areas. A USDA loan allows candidates to finance about 103.5% of the actual selling price of a residential property.  They also don’t come with monthly mortgage insurance. USDA home loans can be used to buy, repair, renovate, and relocate a home. They can also provide water and sewage facilities to home as well as preparing sites.

    The USDA program was originally set up to encourage farming. Agriculture is considered to be a major aspect of the country’s infrastructure. The promotion of home and property loan programs gave people an incentive to continue their agricultural pursuits. Later on, legislation expanded the USDA programs to other types of borrowers. This included financing the purchase of land and covered the cost of repairs and housing in general.

    Qualifying Factors

    An integral qualifying factor for USDA mortgage loans is the location of the property itself. In other words, if you want your home to be eligible for this loan, it should be within areas that are designated by the USDA as being “rural” in nature. Borrowers can contact their local offices that deal with local housing development for more info. USDA Areas

    Moreover, it is important that the borrower use the property in question as his primary residence. In other words he/she cannot rent it out or occupy it on a temporary basis.  There are also some qualifying criteria that require the borrower to show evidence that proves that he/she does not have another property as a primary residence for the household. Other than that a USDA loan also requires that the borrower have a stable credit rating to qualify.

    Most of the qualifying aspects for USDA are similar to FHA but the best part for most borrowers is that they can acquire the property with ZERO down and even ask if the seller will pay their closing costs, and because this loan is backed by USDA there is also no monthly mortgage insurance required – often times making it much more of a cost effective loan for borrowers than even FHA.  But again the client must be buying in an area where this product can be utilized – feel free to call Mark Taylor and his team at 602-361-0707 to find out iof you qualify for USDA financing and where these properties are locatd in Arizona and California.  Thanks so much for reading my article: USDA Home Loans and Why They Are So Convenient

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    USDA Loans Arizona

    USDA Loans Arizona

    When the program was first created a USDA (United States Department of Agriculture) loan was reserved for those who who purchasing land for agricultural purposes, in other words, farmers. Things have changed however and many of those buying a home that is located outside a large city are often rather surprised to learn that a USDA loan is available to them, even though the property they are intending to purchase is not at all one that would traditionally be considered rural.

    USDA AZ Loan Benefits 

    • NO down payment – Finance 100% of your home
    • Affordable
    • NO PMI / monthly mortgage insurance
    • NO maximum loan amount
    • NO assets needed to qualify
    • Flexible credit guidelines
    • Competitive, fixed interest rates so payments do not increase
    • Arizona USDA Loans are for new and existing properties

    An Arizona USDA loan is a true 0% down funding option, making them perfect for those homeowners whose credit is OK but who have struggled to come up with the down payment that other types of mortgage loan typically require them to. In addition, if the property is located in a qualified area, homeowners can often even refinance their existing home with an Arizona USDA loan.

    What is a qualifying USDA AZ area? That literally varies by zip code, so it will not really be until a homeowner does a little research will they really be able to determine whether or not the home they are considering buying will qualify them for an Arizona USDA loan. Click the link at the top of this page to see if you are in a qualifying area.

    There are two basic types of USDA loan available to homeowners who are able to determine that yes, the home they are interested in buying does indeed qualify them for a USDA loan.

    1. The first, and most commonly offered type of USDA loan is the USDA Guaranteed Rural Housing Loan. Home buyers can apply to borrow up to 100% of the final purchase price, negating the need for a hefty down payment. Income limits are relatively flexible for this type of USDA home loan. Buyers can  be making up to 115% of the median area household income and still qualify for a USDA home loan.

    2. USDA Direct Rural Housing Loans are less common and reserved for families with low incomes. They are though a great way for a credit worthy person to obtain ownership of a home when they may have  never thought such a thing would be possible at their current income level.

    Typically, in order to qualify got a USDA Direct Rural Housing Loans the total income of the borrowers must be equal to 50 to 80% of the median area household income, although in certain circumstances a slightly higher income will not disqualify a person from obtaining a USDA Direct Rural Housing Loan.

    A decision on a USDA AZ loan is not based solely on one’s credit rating but borrowers do need a credit score of at least 620 in order to have a good chance of being approved. That is however a lot lower than the credit score than most traditional mortgage loans will be looking for so if you have less than stellar credit a USDA home loan does still put home ownership within your reach. If a borrower can demonstrate that although they may have encountered financial difficulties in the past but they are now back on track their application will still usually be considered favorably.

    The Mark Taylor Team can help you get an Arizona USDA Loan!

    Mark Taylor’s 13 years in the Mortgage industry and his $3/4 of a billion funding give Mark the experience and YOU the confidence that every deal he does is a sound investment. Mark has earned numerous awards by helping structure the intricacies of his client’s real estate portfolios to best set up their investment and retirement needs. This has resulted in numerous awards, but more importantly, thrilled clients.

    His primary role is the facilitation of clients’ needs regarding mortgages, while balancing their goals and objectives with sound financial and mortgage planning to ensure the loan they choose is the correct product for their circumstances – currently and into the future. He also trains and educated Realtors® in ethics, contract law, and short sales offering continuing education hours in those areas to ensure we raise the standard of care to our community. What more could you want from a Mortgage Planning Hero? Wings? He’s probably working on that right now.

    Contact the Mark Taylor Team today to get started on your Arizona USDA Loan.

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